As we wind down the year and look ahead to 2017 and what is likely to be another interesting 12 months for the mortgage market, it is a good opportunity to look back at what has been an eventful 2016.
Whether dealing with the impact of a scheduled change in housing policy, or reacting to surprise announcements, we have remained resilient and worked together to ensure you are up to date and able to provide the same first-class advice to your clients.
But what events had the biggest impact on the mortgage market and how do they fit in with other alterations facing the industry?
Put in place to create a framework of conduct rules, the MCD is a piece of European legislation designed to foster a single market to protect consumers across the continent. The requirements came into force on March 21st and lenders then chose to either move straight to a European Standardised Information Sheet (ESIS) or a KFI+ on a temporary basis.
But now that the UK has voted to leave the EU, the MCD has become another future consideration for the market. Experts now believe that the MCD could well be up for negotiation following Brexit, with some calling for it to be integrated into the exit strategy by the Government and to use the opportunity to implement a set of rules better suited to the UK market.
When it was announced that the stamp duty surcharge on BTL and second homes would increase by 3% on 1st April 2016, a surge of investors pushed to ensure their deals were completed before the deadline. This was a big move by the government, with relatively little warning to the market given it was only announced in the 2015 autumn statement.
But despite industry predictions that the change would greatly curb the BTL market, the sector has remained buoyant and an October report from Rightmove shows that BTL enquiries are up 30% since May’s slight slump following the rush.
Despite only representing the decision to leave the EU, the shockwaves of the referendum result reverberated around the country and left many pondering the effect the eventual activation of Article 50 could have on the mortgage market. What did follow was wild fluctuations in sterling, stock prices and shifts in consumer confidence.
But advisers have generally found that consumer appetite remains strong despite the uncertainty that followed the Brexit decision. It is likely that we as a nation will have a better understanding of the possible effects that the actual exit itself will have on the industry, once it comes closer to realisation.
Technically known as the CP11/16 paper, the Prudential Regulation Authority’s (PRA) announcement followed a consultation on underwriting standards within the BTL market released in March 2016. Since the release of the official document in October, many have been looking at how these standards will fit in with the other BTL changes, such as stamp duty and next year’s changes in tax relief.
Now that the PRA have issued its supervisory statement on BTL underwriting standards, relevant firms will now have to apply affordability testing and use a sufficient Income Cover Ratio to determine whether personal income is adequate to cover mortgage repayments.
With confirmation that Help to Buy 2, or the Help to Buy: Mortgage Guarantee Scheme, is to be concluded at the end of 2016, many are looking ahead to the market and asking whether first-time buyers will be sufficiently supported going forward.
Despite the forewarnings of when each branch of Help to Buy would end, there has been some confusion over whether all Help to Buy schemes are ending. The good news is the Help to Buy: Equity Loan Scheme still has several years left and early signs signify that lenders are now offering high LTV mortgages, which experts hope will negate the impact on the market of ending Help to Buy 2.
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